Forget nationalisation: UK railways need a radical dose of devolution

The railways seem to present a particularly difficult conundrum for governments of all political stripes (Source: Getty)

It's been a torrid time for Britain’s railways lately. In the last six months – as many a hard-pressed City A.M. commuter will know – there have been bad tempered strikes on the Tube and commuter railways. Channel Tunnel trains have had to run the gauntlet of tyre-burning port workers in Calais as well as desperate migrants seeking to escape the Continent.

Closer to home, not a week seems to go by without a headline highlighting another headache for renationalised track maintainer Network Rail. This week was no exception. The Office of Rail and Road handed out a £2m penalty fare of its own. This was tangled up with woeful problems at London Bridge that have been singled out as the cause of a big chunk of the UK’s rail delays over the last year or so.

Sadly, that was not the end of it. Problems with electrification designed to ease the squeeze for Paddington and St Pancras-bound commuters and pave the way for new trains have hit the headlines. Worse still for the government, the chancellor’s favourite policy for a rebalanced economy – the Northern Powerhouse – was plunged into gloom. The decision to “pause” upgrades to bring the north’s railways into the twenty-first century must have been particularly aggravating.

In addition to launching inquiries, new appointees with real experience of running local public services successfully have been brought into Network Rail. This is an old Whitehall trick. Whether it’s the Passport Agency, Border Force or NHS, the government often looks to local government to find people to fix its problems.

The railways seem to present a particularly difficult conundrum for governments of all political stripes. Nationalisation, recently touted by some Labour Party leadership hopefuls, didn’t really work. British Rail was drip-fed money on a make do and mend basis. Then came full scale privatisation, which itself collapsed unceremoniously. Despite stable funding and independent regulation, the Network Rail model is now being challenged.

So what should happen next? Some parts of the system – such as the inter-city routes – should largely be cut loose from state control. The tracks and trains could be hived off under 30 or 40 year concessions. That would allow for long-term investment decisions to be made to the benefit of passengers. Competition from road, air and other rail providers would keep operators on their toes. Light touch regulation could ensure proper access arrangements. Scotland and Wales should be handed full responsibility for their parts of the rail network – as is largely already the case north of the border. Their governments are capable of running major public services and being held to account by their voters.

For London and other major city regions of England, the government should be equally ambitious. A policy of supercharged rail devolution could see the mayor of London, along with leaders of the counties, take responsibility for running the lion’s share of trains and the infrastructure that serve their areas. The government could provide the same railway funding as at present but allow authorities to determine how it is spent. They could then retain savings they make for reinvestment.

This approach would build on Treasury proposals for devolution of expenditure in Manchester – covering health and social welfare. It would lead to better value for money and accountability. Improvements would be made more quickly. And as with Crossrail, investment could be geared to support local growth, employment and competitiveness.

With more partnership working, TfL’s record of commuter rail success could be extended to a much larger area. Building on the London Infrastructure Plan, decisions on transport investment, planning, housing and growth could be taken in concert. Add in fiscal devolution and local government would at last be properly incentivised to develop railway land for badly-needed new homes and commercial space. The same would be true of Manchester, the West Midlands and the North East.

For Whitehall, such an approach would pay handsome dividends. It would help the government to keep a lid on public expenditure. Local government has an exemplary record of living within its means – and ironically delivering austerity effectively. Rail devolution would create an industry structure and range of incentives to drive efficiency and innovation, leading to happier passengers (and voters). Crucially, it would stimulate councils to build more homes and support growth on railway land – for the long-term good of their areas and the country. It may even generate a badly-needed increase in tax revenues.

Ultimately, however, such a policy would finally lay to rest the decades-old question of what the state should do with Britain’s railways. Whitehall needs to depart gracefully and hand over control to local leaders. Now that would be a railway worth waiting for.